The Local Government Finance Bill, which gets its third reading in the House of Commons next week, proposes to let local authorities keep 50% of the UBR that they collect from businesses and all of the business rates from new renewable energy projects.
The grant funding from central government to local councils will cease but Communities Secretary Eric Pickles said a there would be a "safety net fund" to provide support should a council's income drop below a set baseline which has yet to be determined [see earlier story].
Pickles, said: "The current flawed system of government handouts to local authorities encourages a begging bowl mentality, with each council vying to be more deprived than its neighbour. Our reforms will allow councils to stand tall, and reward them for supporting local jobs and local firms. All councils, including the least prosperous, have the opportunity to gain from this system.”
"These new laws and reforms deliver an opportunity for a £10 billion boost to the wider economy, and more business rate revenues for councils. Councils will have a strong incentive to go for growth, generating more money to support frontline services, help pay off the deficit and still protect vulnerable communities."
However, a report by the Centre for Cities, published last year, argued that the reforms should allow councils to retain up to 60% of business rates generated in their area, in order to incentivise the development needed for economic growth.
Under the new scheme there will be much more incentive for local councils to nurture business growth and, just as important, business survival. Empty premises currently get a short business rate relief when they become empty which would mean a reduction in revenue for the Council.
The real prize for Council’s is to foster development to increase the UBR base. The new 330,000 sq foot American Express HQ in Edward Street for instance, could generate £1.4m p.a. in income for the council.
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